Energy Economics Energy Economics

Economic growth refers to that constant increase in the physical aspects
of production in a country. It is measurable with time from the changes
experienced. Economic growth is quantitative in nature and does not
guarantee an increase in the quality of life for the citizens. Economic
development refers to the tangible increase in per capita income which
is associated with the improvement in quality of life. Economic
development is measured using factors such as level of adult literacy as
well as life expectancy levels. Code of ethics refers to all the values
that govern the working of professionals in their area of expert. It
guides them especially when faced by a problem that require decision
making. The success of implementation of ethics is governed by the core
values in the industry. Core values refer to the guidelines upheld by
professionals in their work set up.
The change of the population over a given period is referred to as
population growth. The study of population changes is known as
demography (Wei, 2011). This comprises of the population structures in
terms of gender and age. Minimum wages refers to the least hourly pay to
a person. It may also refer to the lowest pay per day for those who are
paid on a daily basis, or also the least minimum monthly pay for those
who are paid on a monthly basis. This matter has been on the debate
among many economists some of whom support it while others oppose. It is
argued that higher minimum wages are likely to elevate the living
conditions of the workers. The productivity of a population in a nation
determines its success in economic activities (Dorsman, 2013).
Minimum wages refers to the least hourly pay to a person. It may also
refer to the lowest pay per day for those who are paid on a daily basis
or also the least minimum monthly pay for those who are paid on a
monthly basis (Banks, 2000). This matter has been on the debate among
many economists some of whom support it while others oppose. It is
argued that higher minimum wages are likely to raise the living
standards of the employees. It is also argued that higher minimum wages
lowers the poverty levels of the workers (Wei, 2011). To understand the
minimum wages concept, economists such as William argue that one must
understand the concept of demand and supply. This is so because, the
interaction of supply and demand curves causes the market equilibrium to
change. A higher demand leads to higher prices of different commodities,
and the reverse is true (Dorsman, 2013).
Walter Williams, a leading economist gives an analogue to explain the
concept of higher minimum wages and its effects on the citizen and also
the operation of the economy. He starts by raising a question on whether
there would be a change in the lifestyle of people if their minimum
wages rise and the prices of goods remain constant (Bhattacharyya,
2011). When such a scenario happens, the net effect would be that of
people would rush to buy many goods for their use. He also gives the
scenario of where the prices of goods go up, and the net effect is that
of people buying less. This simple concept is what is termed as the law
of demand by economists.
Another concept in the learning of the higher minimum wages and its
effect is that of inflation and unemployment (Banks, 2000). The
principle rule here is that, the higher rate of inflation, the lower
rate of unemployment and the reverse holds. The only time when there is
a tradeoff between the rate of inflation and the level of unemployment
is on in the short time as it is depicted by the Philips curve (Dorsman,
2013). When the economy is experiencing higher levels of unemployment,
there are idle resources, and that is what takes us to the next concept
of the production frontier curve.
Production frontier curve is a graphical representation of the
production efficiency of at least two commodities in an economy if they
apply the same amount of fixed cost (Bhattacharyya, 2011). The
efficiency shifts along the curve whereby a higher frontier means
production efficiency, which means all resources are fully utilized and
thus the economy is at the verge of growth. The net effect of this is
lower unemployment levels and also higher minimum wages. However, in the
long run the net effect will not have a change in the levels of the
minimum wages especially when the economy would be operating at its
fullest (Wei, 2011). Basing the argument on William’s minimum higher
wages article, I totally agree with his argument of the law of demand
and its net effect on the economy. There are, however, few cases where
the law of demand does not apply especially for luxury commodities. This
has not been addressed in the article and therefore, care should be
taken in making a decision (Develi, 2012).
Break-even analysis is a management technique usually used by the
management in the cost-profit analysis of a firm (Banks, 2000). A firm
is said to have reached the break-even point when all the costs are
covered with the revenue generated, and no profit is gained. At
break-even point, profit is equal to zero and also cost is equal to
revenue. It is the analysis of break-even that guides the management on
whether to continue with the undertaken project or to withdraw (Wei,
2011). It also guides plant manager and also the line managers in the
product development cycle they are able to identify which product is at
what stage depending on the time of reaching the break-even point.
The importance of management consulting is for the efficient operation
of capital markets (Banks, 2000). It is noted that, without high quality
consulting services, the capital market would be inefficient. This would
result in higher cost of capital. Similarly, studies conclude that the
quality of consulting can affect the reliability of audited financial
information, which in turn plays an important role in capital markets
(Dorsman, 2013). Management consulting is, therefore, fundamental in
providing the confidence that capital-market participants require and
plays a vital role in the efficient allocation of economic resources.
Because of a series of corporate collapses and audit failures,
perception of management consulting has been an issue over the recent
past years. Quality is a degree or grade of excellence or worth, or
essential and distinguishing attribute of something or someone (Develi,
2012).
Minimum wages refers to the least hourly pay to a person (Crandall,
2006). It may also refer to the lowest pay per day for those who are
paid on a daily basis, or also the least minimum monthly pay for those
who are paid on a monthly basis. This matter has been on the debate
among many economists some of whom support it while others oppose. It is
argued that higher minimum wages are likely to raise the living
standards of the employees. It is also argued that higher minimum wages
lowers the poverty levels of the workers. The business’s output per
employee is 3 units per day which is underemployment of resources. The
revenue per day is $9,600 which is slightly higher than the variable
cost and daily wage (Banks, 2000).
The current scenario of operations is below the break-even level of
operation where the business should operate. When the cost (total) is
higher than the revenue (total) generated by the firm, the business
operations may be discontinued (Wei, 2011). This is so because the costs
do not match with the revenues. Fixed cost does not remain constant in
the long run it is bound to change with the level of output and also
the production level. From the case scenario, it is hard to say that
fixed cost will fall in the long run. The business operates at a risky
level because the total costs exceed total revenue (Banks, 2000). There
is also the under-employment of factors of production. The following is
the analysis of the operations of the business using the information
provided:
Total units per day= 300units, 6,000/20
Total revenue per day= 300units by $32 = $9,600
Daily costs= $7,000 ($70*100) + $2,000= $9,000
Without even taking the value of fixed cost, it is evident from the
workings that the business is not able to break even. This prompts the
question of its sustainability in the future operations (Crandall,
2006).
The first area of recommendation is the increase in daily production
rate per employee so as to employ labour factor of production fully. The
business is operating under capacity as the employees’ rate per day is
only 3units (Banks, 2000). Another area the management of the business
should check is the pricing of the output. The management should carry
out a market research on the issues that concern the behavior of
customers when the prices are increased. The business should also
consider applying the minimum wage legislation in the business. The
management should also consider the introduction of new technology in
the business so as to improve the operations.
The world is going globally technology-driven and so the management
should improve the efficiency levels of production (Develi, 2012). A
company should discontinue from operations only when the break-even
point is not reached for a long time (Banks, 2000). Also, when the total
costs in the long run exceed the total revenues in the same time.
Another scenario is where the business continues to deteriorate in
operations, in the long run. In the case provided the management should
apply the recommendations first and test the business in the long run
before making the decision of closing down (Develi, 2012).
Break-even analysis tool of management if properly implemented will
result to efficient production. It is evident from the workings above
that break-even in the short term is good management tool for both the
plant managers and also the line managers (Dorsman, 2013). This is so
especially in the product development lifecycle. Another notable thing
is that fixed cost does not remain constant in the long run it is bound
to change with the level of output and also the production level
(Bhattacharyya, 2011). Variable cost is a key tool in the change of the
break-even point at various production levels. Application of technology
in operations will improve the effectiveness and efficiency levels of
the business (Crandall, 2006).
The relationship between the rate of inflation and the level of
unemployment should be critically analyzed both in the short and long
term so as to make a conclusive sound decision. Generally, the higher
the minimum wages, the higher the living standards and thus the lower
rates of poverty. There is also a relationship between the level of
motivation in the production process, as well as the minimum wage.
Accordingly, the higher the minimum wages the higher rate of motivation
and thus production efficiency in the production frontier curve.
References
Banks, F. E. (2000). Energy economics: A modern introduction. Boston
[u.a.: Kluwer Acad. Publ.
Bhattacharyya, S. C. (2011). Energy economics: Concepts, issues, markets
and governance. London: Springer.
Crandall, M. S., & Praeger Security International Ebooks. (2006).
Energy, economics, and politics in the Caspian region: Dreams and
realities. Westport, CT: Praeger Security International.
Develi, A., & Kaynak, S. (2012). Energy economics. Frankfurt am Main,
Germany: Peter Lang.
Dorsman, A., Simpson, J. L., & Westerman, W. (2013). Energy economics
and financial markets. Heidelberg: Springer.
Wei, Y. (2011). Energy economics: CO2 emissions in China. Berlin:
Springer.
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